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SOPHISTICATED INVESTING

To be considered a sophisticated investor your accountant needs to certify that you: • Have earned an income of $250,000 or more per annum for the last two years or • Hold net assets of at least $2.5 million.

Sophisticated investors can access investment opportunities not generally available to retail investors. These can include pre-IPO capital offers, equity placements, private equity, property syndicates, hedge funds, and other unlisted securities.

To be considered a sophisticated investor, you need a Qualified Accountant’s Certificate (also called a Sophisticated and Wholesale Investor Certificate or Investor Certificate) signed by your accountant, verifying your assets and/or income. Certificates are valid for two years and you need to make your initial investment within six months of obtaining your certificate.

Further information on this can be found in Chapters 6D and 7 of the Corporations Act 2001.

Before you can access sophisticated or wholesale investments, you must hold a Qualified Accountant’s Certificate (or Investor Certificate).

This test is prescribed in the Corporations Act 2001 as being either: • A gross income of $250,000 or more p.a in each of the two previous years or • Net assets of at least $2.5m

A certificate must be signed by a qualified accountant. A qualified accountant is defined in s88B of the Act as a person meeting the criteria in a class declaration made by ASIC. Under ASIC’s class order [CO 01/1256] you are a qualified accountant if you: • belong to Chartered Accountants Australia and New Zealand, CPA Australia or Institute of Public Accountants (IPA) at the declared membership classification, • or some eligible foreign professional bodies, and • you comply with your body's continuing professional education requirements. Visit the ASIC website for more information.

Electronic certification with Cygura is a compliant way for accountants to certify sophisticated investors and wholesale clients under Chapters 6D and 7 of the Corporations Act 2001.

It depends on the types of investments you are trying to access, or who you are dealing with.

For instance, some Private Banks will only provide general advice, and as such require you to have a valid Investor Certificate. Other examples can include stockbrokers or specialist financial advisors who are only providing general advice. Financial product providers (eg property syndicate or hedge fund) may also require a certificate if you invest directly.

Having a certificate may allow you access to firm allocations in equity raisings, structured products, seed funding opportunities, and angel investing.

Having an Investment Certificate allows you to be offered investment opportunities which are not available to retail investors. These can include: • Pre-IPO offers • Property syndicates • Hedge funds and • Unlisted securities, such as capital raisings for private companies

Additionally shares are often priced at a discount to usual retail offerings.

Some sophisticated investors seek out these opportunities as diversification from traditional asset class investments. Some of these investments may have higher return characteristics, but it’s important to be aware that they may also carry greater risks.

The income or net asset tests are designed by the regulators with the view that people meeting these criteria are more likely to be able to evaluate the merits of the offer of securities and financial products they wish to invest in.

You may meet the asset and income tests and still choose not to be a Sophisticated Investor. This means that you are considered retail, and therefore offered greater disclosure and protection by the Regulator.

By confirming your registration and being certified by a qualified accountant, you are essentially “opting in” to be a sophisticated or wholesale investor. This means you may not receive product disclosure statements or prospectuses from product issuers, and your advisors are not required to give you a Statement of Advice or have the same dispute resolution processes in place.

For instance, some Sophisticated Investors may use a Financial Advisor who may treat them as a Retail Investor by providing them with additional disclosure such as a Statement of Advice (SOA). This means they are receiving personal financial advice and have retail protections under the Law. SOAs are meant to be clear concise and effective, providing sufficient information for you to understand the advice and consent to any recommendations. You do not need an Investor Certificate to deal with this advisor.

This same Sophisticated Investor may wish to diversify their portfolio and invest in a hedge fund. They may also bank with a Private Bank, and be offered other financial products. In this instance, the Investor is considered Sophisticated or Wholesale with these Financial Service Providers, and would require an Investor Certificate for these investments.

By using Cygura you choose which advisors and product issuers can see your certificate, so you know exactly who is relying on your certificate, and who you have waived retail protections with.

Being registered as a sophisticated investor does mean you need to undertake any investments. You should evaluate every opportunity carefully, sophisticated or otherwise, before deciding if it is right for you.

Most sophisticated investors use a network of advisors and/or product providers. You can ask your Private Bank, wealth advisor, or accountant about opportunities. They won’t necessarily see all opportunities, as depending on the firm, it may need to be an “approved product”.

Approved product lists are a form of risk management for the Australian Financial Services Licensee and are not legislated. If an investment opportunity is not on your advisor’s APL, it doesn’t necessarily mean it is a bad investment.

If you wish to stay informed on the latest sophisticated investments and opportunities, you can subscribe free to our newsletter.

Not all private banks operate in the same way. Some service family offices and therefore only provide general advice products – ie products for sophisticated or wholesale investors. These private banks require investor certificates.

Other private banks have a dedicated financial planning unit, and will still provide personal advice to their clients.

HOW TO CERTIFY INVESTORS

1. Register with Cygura. 2. Log in and click on the “My SIs” icon. 3. Click on the “Add” button, and input your client’s name and contact details. 4. We’ll do the rest – your client will receive an email from us advising them of your nomination.

1. Register with Cygura. 2. Log in and click on the “My SIs” icon. 3. Click on the Add button, and input your clients name and contact details. 4. We’ll do the rest – your client will receive an email from us advising them of your nomination. 5. They need to click on the link to accept the nomination. 6. This will take them to their Cygura page, which will ask for some further contact details. 7. Now they are connected to you.

1. Login to cygura. 2. Click on the “My SIs” icon. This is where you add clients, as well as accredit existing clients. 3. Look for the client you wish to certify, and select “Accred” next to their name. This will bring up your Declaration screen. 4. Declare your accountancy qualifications , what your membership designation is, and certify that your client qualifies under Chapters 6D and 7 of the Corporations Act (2001) either under the income or asset test. You are required to date this declaration, and this is the date of the certificate.

No problem. You can login to Cygura, click on the “My SIs” icon, and add them as a client. As long as they have internet access to accept the nomination and add some further details, they can complete their registration.

Their accountant will still have to certify them as a sophisticated investor, and will receive an email from Cygura with the Investor’s request.

With Cygura Corporate Solutions you can access the convenience of Cygura for your clients organisation-wide. Cygura integrates with your current client relationship management (CRM) system, enabling you to upload your clients, view the status of your client’s certificates and even download a copy of certificates in seconds.

As you are aware, no two clients are the same. Each have their own preferences and objectives, and most have multiple financial arrangements. Most sophisticated investors are time poor, tend to travel a lot, and like unique investment opportunities that can help bolster returns and diversify risks.

Cygura offers them a central portal where they can share their investor certificates with all their trusted advisors (bankers included). Your client can be on a business trip interstate, and still participate in the latest investment opportunity.

Their accountant will receive an email reminder to recertify clients prior to expiry, helping to ensure that certificates are always up to date.

Cygura means less running around for everyone, allowing you to focus on increasing the value add in your client relationship.

To be considered a sophisticated investor, and to access investment opportunities not available to retail investors, a Qualified Accountant’s Certificate (also called a Sophisticated and Wholesale Investor Certificate or Investor Certificate) signed by a suitably qualified accountant must be provided to the advisor or financial product provider. Certificates are valid for two years.

No, you are in complete control over who sees your sophisticated investor certificate.

When an advisor or product issuer requests to view your certificate, you will receive an email from Cygura. If you do not wish to allow that person to view your certificate, you simply log into Cygura and click on “remove” beside their name.

Cygura is the industry best practice approach for managing sophisticated and wholesale investor compliance. Electronic certification with Cygura is a compliant way for accountants to certify sophisticated investors and wholesale clients under Chapters 6D and 7 of the Corporations Act 2001. It eliminates the need for manual record keeping, integrates with your CRM system and provides an auditable record of every client’s investor status at any point in time.

Cygura gives advisors and accountants the ability to view the status of their clients in one central location, simplifying the compliance when marketing new investment opportunities to sophisticated investors. Advisors can store and download a copy of their client’s certificate directly from Cygura.

By law, certificates are valid for 2 years after being signed by an accountant. Cygura keeps track of expiration dates for you, and even sends a reminder to you and your client’s accountant about upcoming expiries. This gives you the advantage when offering valuable opportunities to your client.

Once logged in, click on the Change Accountant icon. You can update the details of your accountant here, and Cygura will send the new accountant an email advising them of the change of details. We recommend as a courtesy that you contact both the old and new accountant and advise them directly of your changes.

Simply let your advisor (or product provider) know that you are registered with Cygura and they can log in, connect with you, and view your certificate.

You will receive an email from Cygura notifying you that an advisor wishes to access your certificate. If you do not wish to share your certificate with that advisor you can deny this request by logging in and clicking on “remove” beside their name.

With Cygura, you can view your list of your sophisticated investors or wholesale clients who hold a current certificate via the My SIs page. So you’ll instantly know which clients are compliant and can be contacted regarding wholesale investment opportunities. You can also generate an “As At” report with the date you wish to check as the nominated date.

You can also download a copy of your client’s certificate if they choose to invest, meeting your compliance obligations.

Yes, Cygura integrates with your current client relationship management (CRM) system, enabling you to upload your clients, view the status of your client’s certificates and even download a copy of certificates in seconds. Cygura registration can even be branded and embedded into your company’s website.

When you register as an advisor, accountant or product provider you get immediate access to our toolbox of template client letters, newsletter articles, fact sheets and more. Our team can also work with you to create tailored communications to your organisation’s clients.

SMSF FAQ

According to ASIC’s updated “Statement on wholesale and retail investors and SMSFs” if the financial services does not relate to superannuation product, then the Trustee can be treated under the general test under the Corporations Act. This means if an SMSF Trustee has net assets of $2.5 million, earns a gross income over $250,000 p.a over the last two years, or if the value of the investment is at least $500,000 then the Trustee can be considered a “wholesale” client.

There are many interpretations. The Institute of Chartered Accountants Australia and New Zealand recently published “Self-Managed Superannuation Funds as wholesale clients – Issues for accountants” (October 2015) which outlines their interpretation.

Their paper notes that “the trust fund itself is not a legal entity and the status of the fund’s trustee(s) as a wholesale client needs to be looked at”. They add that “while many SMSFs will have the necessary level of assets or income within the fund, the control test also offers scope to include assets or income held outside of the SMSF”. If you need further clarification, it is recommended that you contact your industry body for clarification.

As a sophisticated or wholesale investor, you’re considered more likely to be able to evaluate the merits and risks of an investment.

This means you will not receive product disclosure statements or prospectuses from product issuers, and your advisors are not required to give you a Statement of Advice or have dispute resolution processes in place.

This page provides references to
the
policies and agreements that apply to all products and services and your dealings with Cygura, a
division of Sophisticated Access Capital and all associated companies and business partners.